EIU's Peru Business environment at a glance

Policy towards private enterprise and competition

2008-10: Business-friendly rules the norm, but distortions persist, owing to powerful lobbying groups.

2011-12: Continued strengthening of business rules and intellectual property protection to comply with terms of free-trade agreement (FTA) with the US.


Policy towards foreign investment

2008-10: Few formal barriers, but some ambiguity in policy towards investors. Mining, energy, communications and transport will remain magnets. Addressing community-based tensions will be important in reducing political risk.

2011-12: Emphasis on attracting foreign investment into transport infrastructure, mining, energy and tourism.


Foreign trade and exchange controls

2008-10: Implementation of FTA with the US. Negotiation of bilateral FTAs with the EU, Mexico and China. Tariffs will remain below the common external tariff (CET) of the Comunidad Andina (CAN, the Andean Community).

2011-12: Gradual liberalisation to comply with bilateral trade agreements.


Taxes

2008-10: System remains unsettled and complex. Net assets and financial transactions taxes retained at lower rate; little prospect of cut in 19% value-added tax (VAT) rate.

2011-12: Additional elimination of some of the many tax exemptions to widen the tax base, but no major reform.


Financing

2008-10: Capital market grows in depth and sophistication. Bank lending sees cautious growth.

2011-12: Deepening local capital market as pension funds grow.


The labour market

2008-10: Additional rigidities introduced as labour code is revised. Wage pressures weak, but skill levels generally low.

2011-12: Unions still weak, owing to high unemployment and underemployment. Implementation of FTA with the US increases pressure for greater labour-market flexibility.


Infrastructure

2008-10: Concessions issued and awarded for transport infrastructure, including roads and ports.

2011-12: Further development of projects linking Peru’s transport infrastructure with that of Brazil.

Publication: EIU Business - Background
Provider: The Economist Intelligence Unit Limited
Date: November 5, 2007